7th Feb 2019 07:00
LONDON (Alliance News) - Moody's Investors Service late Wednesday upgraded Rio Tinto PLC's senior unsecured rating to A2 from A3 with a stable outlook.
This concludes the review for upgrade initiated in November 2018, Moody's said.
The ratings agency said the upgrade reflects actions taken by the mining company in recent years to reduce debt, strengthen its balance sheet, exhibit discipline in capital expenditures and shareholder returns.
"These actions have positioned Rio Tinto to evidence better performance through and greater
resilience to downturns in the commodity markets than seen in the 2015/2016 time frame" said Carol Cowan, senior vice president & lead analyst for Rio Tinto.
Moody's noted that Rio Tinto has also continued to refine its asset portfolio, focusing on its key positions in iron ore, copper and aluminum while exiting coal and reducing its uranium holdings among others.
Over the past year, Rio Tinto generated USD11.2 billion in asset sales proceeds, including USD3.5 billion received in late December 2018 for the sale of its interest in the Grasberg copper mine in Indonesia. Proceeds have been used for liability management as well as augmenting shareholder
returns.
The ratings agency highlighted that Rio Tinto's liability management programme, put in place following the commodity price collapse in the early 2015, has resulted in debt being slashed to USD12.5 billion as at the end of June 2018 from USD28.5 billion at the end of December 2013.
Meanwhile, the stable outlook reflects Moody's expectation that although prices for the principal commodities comprising Rio Tinto's business will exhibit volatility, it will continue to generate meaningful earnings, will be free cash flow generative and will remain committed to its capital allocation discipline.
Looking ahead, Moody's said the rating can be further upgraded if Rio Tinto's operating profile improves, debt levels reduce and the company will demonstrate a strong production growth and increasing earnings contribution from its copper and aluminum segments.
Negative action on the ratings and outlook could materialize if Rio Tinto substantially under-performs Moody's current expectations, it said. This could be caused by a material weakening in Rio Tinto's operational performance, sustained increases in the costs, and issue of additional gross debt to fund shareholder or growth initiatives.
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